On The Crypto Age

On The Crypto Age

On The Crypto Age

$BTCUSD

At 1st when you heard of cryptocurrency and did an ICO (initial coin offering) then it was not a security and did not need to be registered with the US Securities and Exchange Commission (SEC).

That did not last long

Regulators and securities lawyers started looking at the ICOs getting done aka to market, and realized that most of them were investments of money in business ventures that legally counted as securities offerings, and then the SEC got in the dance.

Currently, Bitcoin is trading at: 9,345.793945, -88.167969, or -0.934579%, at close: 1:55p GMT, the market is closed

Then came a 2nd wave, of ICOs that admitted they were securities offerings, but that were offered only to accredited investors or only outside of the US in order to avoid SEC registration.

This was awkward

The Big Q: Why?

The Big A: Well, if you want your cryptocurrency to be freely transferable on its own blockchain, to be usable as a medium of exchange, etc., then you do not want to limit it to accredited investors.

With that enlightenment, we would expect the day that ICOs to be done as registered securities offerings was just ahead.

The day where they file registration statements with the SEC and deliver prospectuses and generally behave like public stock offerings.

And that day may be on us

“The Praetorian Group filed the 1st ICO (initial coin offering) registering tokens with the SEC,” reports Renaissance Capital. Shayne and I have read its  registration statement, and  it is full of 1st’s.

For instance, this disclaimer in a prospectus for a securities offering look like a 1st: To the maximum extent permitted by the applicable laws, regulations and rules the Company and/or the Distributor shall not be liable for any indirect, special, incidental, consequential, or other losses of any kind, in tort, contract, tax or otherwise (including but not limited to loss of revenue, income or profits, and loss of use or data), arising out of or in connection with any acceptance of or reliance on this Prospectus or any part thereof by you.

That is not my traditional view of a prospectus

The way a prospectus works; securities lawyers write it read, and re-read it and make sure it is right, and then it is deliver it to investors to rely on. We do not say hey mister, here some stuff but please do not rely on it. Wild!

Meanwhile, I read a story about how the US Treasury’s Financial Crime Enforcement Network thinks that “a developer that sells convertible virtual currency, including in the form of ICO coins or tokens, in exchange for another type of value that substitutes for currency is a money transmitter and must comply with” anti-money-laundering and anti-terrorism-financing requirements.

I see that FinCEN means that if a public company sells stock, it does not become a money transmitter, but if it sells tokens, it does. Complex, Yes?

Praetorian or Dentacoin or Kodakcoin or whatever are not currencies, and they are not running money-transmitting businesses. They are securities, and they are  running real businesses.

Are the words coins and tokens popular now, the same as a Cert in days gone bye. And popular now because people thought they were a way to avoid registering with the commission.

Popular, right or wrong

The SEC regulated them anyway, and now so will FinCEN, as the issue is fundamental. If you raise money by selling Smoke you may think “well, there is no agency that regulates Smoke, so I can Smoke to investors with no regulation.”

Hang on, the more likely outcome is that every agency will take a look at your brand of Smoke, and decide that it falls under its umbrella.

ICOs were a way to sell securities without calling them securities.

The SEC came forward and declared that ICO tokens were securities. But they are also money transmitters. They are commodities and insurance, IP,  and perhaps show dogs and cats.

That means that they are not less regulated than stocks, they are more regulated than stocks.

Here is the conclusion in this Crypto Age, the coins and tokens do not fit in any existing regulatory category, so they are being claimed by all of them.

The Key will be just how long will with it take for the new wizards of our financial and business worlds to declare the regulators dinos in this new age.

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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